Stock Market

With back to the wall, autocos plan to export unsold BS-III stock

Swaraj Baggonkar

Chillicious News

The Supreme Court today barred sales of all old and polluting Bharat Stage III (BS-III) vehicles from April 1 even as manufacturers and their dealers are saddled with unsold stocks of at least 700,000 units.

The industry has an inventory of unsold two- and three-wheelers and commercial vehicles which run on BS-III engines which are 80 percent more polluting (particulate matter) compared to the new generation BS-IV engines. There are near-nil BS-IV units of passenger vehicles (cars and SUVs) according to manufacturers.

Manufacturers like Mumbai-based Tata Motors will reroute these unsold stock to some of its overseas markets which are still under BS-III norms. These are countries in Middle East, Africa and Bangladesh. India will completely transition to BS-IV from April 1.

Speaking on the sidelines of the launch of Tigor Guenter Butschek, Managing Director, Tata Motors said, “I disagree with what I read that it is was possible to move BS-III vehicles to BS-IV. Let me tell you that is not possible. So one of the solutions we can look at is exporting the BS-III stock.”

While Butschek did not provide details of its own inventory, sources from Tata Motors pegged the figure to be at 30,000 units. Considering an average price of a commercial vehicle to be at Rs 12 lakh the value of the total unsold stock comes to Rs 3,600 crore for Tata Motors. Dealers of Ashok Leyland were buying BS-III stocks until mid-March. The industry had an inventory of 96,000 unsold BS-III commercial vehicles as of March 10.

Due to the on-going Navratra (celebrated in North India) and Gudhi Padwa, Ugadi (in Maharashtra, Karnataka, Goa and Andhra Pradesh) festivals there has been an increase in the number of sales at the dealer levels in the past few days especially with regards to two-wheelers. However, with the uncertainty over the fate of the BS-III stock all manufacturers/dealers resorted to heavy discounting to clear inventory.

“Despite being a market leader with 50 percent share in 3-wheelers, we will have practically zero stock of BS-III 3-wheelers at March end, at our dealerships as well. Desperate discounting in the range of Rs 2,000 to Rs 12,000 per vehicle by our main competitor, had some impact on our retail sales,” said S Ravikumar, president business development, Bajaj Auto.

India’s largest two-wheeler maker Hero MotoCorp had submitted to the Supreme Court that it stands to bear a loss of Rs 1600 crore due to the unsold stock of over 220,000 which was 297,000 nearly three weeks ago. Honda, the second largest two-wheeler seller in India, has a stock of more than 100,000 units while Bajaj Auto had a stock 80,000 stock of unsold BS-III inventory.

While Honda declined to comment on the matter Hero Motocorp did not respond to mails and text messages. Bajaj Auto, the country’s biggest two and three-wheeler exporter has the option of exporting the unsold stock to African nations where it has already built a very strong network.

John K Paul, President, Federation of Automobile Dealers Association (FADA) said, “We can say that there are 6-7 lakh units of BS-III stock with dealers with the dealers alone of which 80-85 percent will be two-wheelers.

The federation had written to SIAM asking vehicle manufacturers to take back the unsold stock of BS-III. However, SIAM did not respond to the letter, according to Paul.

“We had written to SIAM addressing it to its president and vice president asking the manufacturers to take back the stock. We have not heard from manufacturers on this. The SC ruling is catastrophic for small dealers if manufacturers do not step in and assist them. Most of the stock is bought on finance so even the banks will be impacted by this”, added Paul.